What the U.S. Says: Investigators in the case say that Devyani Khobragade, a member of India’s consular staff in New York, made false claims to obtain a visa for a domestic worker, and caused another individual (the domestic worker) to make statements she knew to be “materially false” in a visa interview with U.S. officials in New Delhi.

The U.S. prosecutor also alleged that Ms. Khobragade paid Ms. Richard far less than the wage required by visa rules and worked her over the stipulated hours set out in the contract submitted to obtain the visa during her employment between Nov. 2012 and June 2013.

In a statement Wednesday, Preet Bharara, the U.S. Attorney for the Southern District of New York prosecuting the case, said that the allegation is not just that the Indian consular officer sought to evade the law, but “that she affirmatively created false documents” to obtain a visa for her maid and continued lying to U.S. authorities.

In the U.S., the process of procuring a visa for a domestic servant requires the employer to contractually agree to pay the worker at least the minimum wage, excluding benefits such as accommodation.

The purpose of Ms. Khobragade’s “scheme,” says the U.S. Attorney, was to “unfairly treat a domestic worker” in ways that violate the law.

What India Says: The Embassy of India in Washington D.C. in a statement on Wednesday said it became aware of the matter between Ms. Khobragade and Ms. Richard six months ago in June.

At that time, the embassy said it had requested help from the U.S. State department to trace Ms. Richard, “an Indian citizen who entered the US with an Official Passport of the Government of India, who was found missing on June 23, 2013. This was reported immediately to the Office of the Foreign Missions in New York and NYPD,” the embassy said in a statement.

Indian officials said they also sought “action against blackmailing by Ms. Richard” who had allegedly demanded that she be permitted to change her passport, visa status and place of employment. The Indian embassy says it had also requested the U.S.’s help to send Ms. Richard back to India after her passport was revoked on July 8, 2013. It is unclear who revoked her passport.

Indian officials also allege that Ms. Richard had “taken cash, mobile phone and documents from the residence” of her employer and they had asked for assistance to secure her arrest.

What India Says: According to Ms. Khobragade’s lawyer, Daniel Arshack, as well as Indian officials, the consular official was arrested as she dropped off her daughter at school and handcuffed.

India has retaliated and has been outraged at claims that Ms. Khobragade was strip-searched and put in a common New York City jail with drug addicts.

What U.S. Says: In his statement Mr. Bharara, the U.S. Attorney, said that contrary to reports from India of Ms. Khobragade’s arrest, she was not arrested in front of her children.

The State Department agents, says Mr. Bharara, arrested Ms. Khobragade in the “most discreet way possible.” He adds that the 39-year-old was not handcuffed and avoided a standard procedure of seizing the suspect’s mobile phone. In fact, the prosecutor says, she was offered the chance to get in touch with whomever she needed.

According to the statement, the agents even offered her coffee and food.

Ms. Khobragade was subjected to the standard search procedure which is followed for everyone, “rich or poor, American or not,” Mr. Bharara said.

On Diplomatic Immunity

What the U.S. Says: According to U.S. Laws, Ms. Khobragade can have diplomatic immunity only for acts undertaken in her official capacity because she is a consular official rather than a diplomatic agent. Diplomatic agents enjoy the highest degree of privileges and immunities including complete personal inviolability, which means they may not be handcuffed (except in extraordinary circumstances) arrested, or detained.

In a move that could shield Ms. Khobragade from prosecution by conferring diplomatic immunity, India has reassigned her to a permanent mission at the United Nations. According to her lawyer, this will bring her under the ambit of greater legal protections compared to what she was entitled to as a deputy consul-general. To avoid prosecution, the diplomatic immunity would need to be retroactive, which is rare but not without precedent.

On Indo-U.S. Relations

What the U.S. Says: On Wednesday, the U.S. Secretary of State John Kerryexpressed his regret and said his country would “not allow this unfortunate public issue to hurt our close and vital relationship with India.”

He stopped short of a full apology and said that he could empathize “with the sensitivities” from India about the events that unfolded after Ms. Khobragade’s arrest.

What India Says: India, however, has had a far more enraged initial reaction.

On Tuesday, Indian National Security Adviser Shivshankar Menon said the arrest was barbaric. Prime Minister Manmohan Singh described the treatment of the Indian diplomat was deplorable.

India canceled meetings with a visiting U.S. congressional delegation and revoked diplomatic privileges for American officials. Security barriers on streets outside the U.S. Embassy in India’s capital city were dismantled.

However, in a calmer response following Mr. Kerry’s statement, India’s External Affairs Minister Salman Khurshid Thursday told reporters that the two countries were friends.

He maintained that India expected its citizens to be treated with dignity and that any aberration would be corrected.

“We want dignity restored. We want our diplomat to be secure from any further harassment,” Mr. Khurshid said.

About India Real Time

India Real Time offers analysis and insights into the broad range of developments in business, markets, the economy, politics, culture, sports, and entertainment that take place every single day in the world’s largest democracy. Regular posts from Wall Street Journal and Dow Jones Newswires reporters around the country provide a unique take on the main stories in the news, shed light on what else mattered and why, and give global readers a snapshot of what Indians have been talking about all week. You can contact the editors at indiarealtime(at)wsj(dot)com.